First of all, we have seasonal factors to contend with. Stocks typically outperform from November through April and under perform from May through October. This seasonality was especially pronounced in 2010 and 2011.
Secondly, events in Europe are heating up. There's pressure on Spanish bonds which is problematic if it continues but the real concerns are political. There are French and Greek elections in April. It appears Hollande in France has the backing to defeat Sarkozy. Being a Socialist this could create some tensions in the European Union and there will have to be an understanding with Merkel. But Greece is an economic and financial basket case. Capital has been fleeing the country for months and the situation is dire. Various extreme political groups from rabid fascists to communists are gaining enough political traction to split the government to the point where there will be no political consensus and the new government is liable to backtrack on its commitments that were given to guarantee the last tranche of aid. Greece will leave the Euro. There's enough politically induced volatility between these three factors to provide quite a roller coaster market for our stock market.
Thirdly, commodities are still manifesting the kind of price action which has concerned me since early February. Which dovetails into my fourth point:
The market is spooked because the FED appears to be cutting off the spigot of easy money which has "floated all boats" since March 2009. Recent comments out of the latest FED meeting minutes seem to indicate a "wait and see" as it appears our economy is gaining some measure of positive steam.
With all that said, the Bulls still hold the high ground as seen on the two charts below: